Could Italy Rekindle The Eurozone Crisis?

By Shareholders Unite:While everybody was focusing Greece and the European Central Bank (ECB), people were merely assuming that Italy under the hugely popular and zealously reforming Mario Monti had done enough to stop the rot of the Euro zone crisis right there, where it matters most. The question is, has he?First the good news. Monti is highly capable and highly popular. By the latest count, his technocratic government commands a 60%+ approval rating. That is huge, considering the amount of harsh reforms and austerity measures his government have pushed through in record time. He has done more for necessary Italian economic reforms in a couple of months than the previous governments in 20 years, and that is no exaggeration.And now he has arrived at his 'piece de resistance', labor market reforms. On the table are proposals that make it easier to fire people for economic reasons. Now, employees have recourseComplete Story »

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THE narrative running through coverage of the euro zone seems to have shifted on the back of recent policy moves. Last week's coordinated liquidity intervention gave a significant boost to equity markets. European Central Bank head Mario Draghi kept the momentum going a day later, by suggesting that should euro-zone leaders reach an agreement on fiscal integration, "other elements might follow", a seeming reference to stepped up ECB bond-buying.

Europeans are bracing themselves for a severe case of post-holiday blues.
As the warm summer months draw to an end, the region’s sovereign debt crisis appears to be coming to a head.
Greek Prime Minister Antonis Samaras has initiated a charm offensive in an attempt to convince European leaders to give the debt-stricken country more time to carry out reforms, though Germany and France have already sent a strong signal that there will be no leeway for Greece.

BRUSSELS: The European Central Bank says it wants euro zone countries to stir up growth with structural reforms, but its own money printing plans have taken the pressure off politicians for action, leaving European Union rules to drive often unpopular change. And although the EU toughened up those rules during the sovereign debt crisis, the European Commission has been weak in enforcing them in the teeth of opposition from governments reluctant to coordinate their fiscal policies.

BRUSSELS: Greek Prime Minister Alexis Tsipras won a commitment to seek a last-minute rescue at an emergency euro zone summit on Tuesday, before his country's banks run out of money. Italian Prime Minister Matteo Renzi told reporters that EU leaders would hold a further summit on Sunday to approve a plan to aid Greece if creditor institutions are satisfied in the meantime with a Greek loan application and reform commitments. "The ball is in Greece's court," Renzi said.

I'd LIKE to say a bit more about the policy side of things given the state of the world economy. There is a great deal of attention paid to fiscal issues, and certainly fiscal issues deserve scrutiny. Greece, Ireland, and Portugal have little choice but to embrace swingeing short-term austerity, but massive short-term cuts in places like Spain and Italy are foolish and counterproductive.

TODAY'S biggest news is the word that the European Central Bank is intervening in European debt markets in force, buying up Spanish- and Italian-government debt. The ECB spent last week expressing reluctance to take this step, but without it, the euro crisis threatened to spin irretrievably out of control. What are these purchases all about, and will they work?